RBI policy review, Greece elections in focus

Outcome of a parliamentary election in Greece, Reserve Bank of India's mid-quarter monetary policy review, progress of the monsoon rains, a two-day meeting of the Federal Open Market Committee on US interest rates and G20 summit will decide the near-term trend on the bourses. The Reserve Bank of India is seen cutting its key policy rate viz. the repo rate by 25 basis points at mid-quarter monetary policy review on Monday, 18 June 2012. Easing of core inflation, falling crude oil prices, weak industrial production data for April 2012, sharp deceleration in GDP growth in Q4 March 2012 and latest data showing decline in exports in May 2012 have raised expectations that the central bank will cut interest rates to revive economic growth. On the flip side, the hike in minimum support prices of various kharif (June-October) crops 2012 is expected to further fuel persistently high food inflation in the coming months. Food inflation has been in double digits for around a year and has been contributing significantly to overall inflation. The government on Thursday, 14 June 2012, raised the minimum support prices of various kharif (June-October) crops 2012 in the range of 15.3% to 53.1% Greek voters return to the polls on Sunday, 17 June 2012, after the splintered results of a May 6 parliamentary election left no party able to put together a government. The poll could potentially decide whether the nation will remain in the euro zone. The European Central Bank stands ready to provide support to the euro-zone system, said its President, Mario Draghi, in prepared statements at a speech on Friday, 15 June 2012. "The Eurosystem will continue to supply liquidity to solvent banks where needed," he said at the ECB Watcher's conference. His comments come amid reports that central bankers are ready to take measures to keep liquidity flowing in international markets should the results of Sunday's Greek elections trigger a credit crunch. A key summit of the European Union is scheduled on 28 and 29 June 2012 to discuss the ongoing European debt crisis. The Federal Open Market Committee holds its next policy meeting on June 19-20. It remains to be seen if the Fed extends Operation Twist -- a plan expiring this month that lengthens the average duration of bonds in the Fed's portfolio. The Fed launched Operation Twist in September 2011 to lower long-term borrowing costs. The 7th Group of 20 industrial and developing nations summit is scheduled to be held in Los Cabos, Mexico on 18 and 19 June 2012 to discuss current affairs such as poverty, youth unemployment and environmental issues. The leaders are also likely to discuss the ongoing European debt crisis.